In the case of Murphy et al. v. United States in 1926, the Supreme Court ruled on a dispute regarding taxation and land ownership rights between Native American tribal members and the federal government. The plaintiffs, members of an Oklahoma tribe, were allotted lands under Congressional acts which also exempted these lands from taxation until they received fee simple titles to them (full ownership). However, when oil was discovered on their property and leased out for profit by the tribal members themselves or their heirs, it became subject to income tax according to IRS regulations. The court held that this income derived from restricted Indian lands should be considered as taxable since there was no explicit exemption mentioned in any relevant statutes or treaties with respect to such profits made by individual Indians from leases on tribally owned properties. This decision established a precedent for taxing personal incomes earned by Native Americans through commercial exploitation of resources found within reservation territories unless expressly prohibited by law.

In the dissenting opinion for Murphy et al. v. United States, Justice Holmes disagreed with the majority's interpretation of the Volstead Act and its application to industrial alcohol. He argued that Congress did not intend to include denatured alcohol within the scope of "intoxicating liquor" as defined by this act, which was primarily aimed at prohibiting beverages capable of being used for beverage purposes or internal human use causing intoxication. According to him, it would be absurd if a law intended to prevent drinking made it illegal for someone who never drank in his life but had a garage full of automobiles and bought denatured alcohol wholesale from an authorized dealer for fuel purposes only because he could distil out enough drinkable spirits from what he purchased legally under government regulations.